Review of Quantitative Finance and Accounting

, Volume 53, Issue 4, pp 1031–1068 | Cite as

Inside the board room: the influence of nationality and cultural diversity on cross-border merger and acquisition outcomes

  • Jian Cao
  • Kimberly M. EllisEmail author
  • Mingxiang Li
Original Research


This study is among the first to systematically examine how increasing nationality and cultural diversity on the boards of large U.S. corporations influence their cross-border merger and acquisition (CBMA) decisions. We find that firms with foreign representation on boards more frequently engage in less profitable CBMAs. We also find that the negative role of foreign directors in the strategic decision-making process is due at least in part to the cultural differences between foreign and U.S. directors, especially in transactions with a high degree of uncertainty. Finally, we show that the adverse effect of foreign directors prevails in the post-SOX (Sarbanes–Oxley Act) period and reduces with longer foreign director tenure and more inclusive board culture. Overall, our findings suggest the presence of foreign directors could negatively affect CBMA decision-making effectiveness, consistent with the argument that national cultural diversity hinders communication and collaboration within boards.


Foreign directors Cross-border mergers and acquisitions Cultural diversity Cultural distance Board diversity 

JEL Classification

G34 M14 Z1 



We thank Feng Chen, Michelle Harding, and participants at the 2018 AAA Annual Meeting for helpful comments on earlier drafts of this paper, as well as Chad Harwood and Tracie Frost for research assistance. Ellis and Li acknowledge the research support at FAU and Cao acknowledges the financial support from the Stone Fellowship.


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Copyright information

© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  1. 1.Florida Atlantic UniversityBoca RatonUSA

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